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Monday 1 September 2014

Blackstone targets Ireland for major investments in 2014

Peter Flanagan

Published 26/01/2014 | 02:30

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ICONIC: The Burlington Hotel, which was bought by Blackstone in 2012

THE biggest private equity group in the world is on the verge of making a major investment in Ireland, and could become the dominant foreign investor in the country.

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Blackstone Group – the New York-based firm led by Stephen Schwarzman – has raised a fund worth some $5.5bn (€4.1bn) to buy European commercial real estate, and it is expected that much of that fund will be used to buy property here.

Blackstone has already done some deals in Ireland, but not on anything like the scale of other businesses based here.

The fund – known as Blackstone Real Estate Partners (BREP) Europe IV – has commitments worth €4.1bn but is yet to close, implying the final size of the fund will be even bigger than that.

That fund is already €1bn bigger than the previous record for a European property fund, which closed in 2009.

A company spokesman declined to comment on Blackstone's plans, but industry sources are clear that the US firm, and other private equity firms, will be in the market here in 2014.

"Clearly it will depend on what becomes available, but Blackstone is the biggest real estate investor in the world, and it specialises in distressed assets, whether they have been overleveraged or over financed.

"Ireland has arguably the largest amount of good quality property in a distressed position in the world, so it's only natural that a company like them will look to be involved over here," he added.

Blackstone hit the headlines here when it agreed to buy the Burlington Hotel for some €67m in 2012, but did little business here in 2013.

Earlier this month however it forked out around €100m for three offices, known as the Platinum Portfolio, that had been owned by Nama and now agents here fully expect that deal to be the first of a much more active 2014 for Blackstone in Ireland.

One property agent contacted by the Sunday Independent said the market was already waiting on Blackstone to make their move, but warned that the price would have to be right for the New York-based fund to move in.

"We were surprised that the moved on the Platinum Portfolio properties, but that deal signalled to us that Blackstone will be here in a big way.

"It would be foolish to think that will be the only deal they do here in 2014," added the agent, who did not want to be named for fear of damaging any potential relationship with Blackstone.

While the group are not believed to be in negotiations over specific assets at the moment, Blackstone has a track record of investing in a wide range of properties from hotels and office blocks to apartment blocks. In the US it has been involved in the first securities backed by rental homes.

Under Mr Schwarzman's guidance, the company has become one of the savviest investors in the world, and any deals they do here would only happen if the price was right. That unwillingness to move off their own valuation of an asset could delay any deals that might happen here.

Property investors have repeatedly bemoaned the lack of "realistic" pricing in the Irish market, with the banks in particular seen as overvaluing some of their assets.

One of the main targets for Blackstone is believed to be the Central Park business park in south Dublin, which is on the market for some €250m.

That property, which includes five office blocks and a large-scale apartment development, was constructed by Treasury Holdings but has since been taken over by Nama. The state bad bank appointed Savills and Jones Lang LaSalle to sell the property last November, and it is believed the shortlist has been whittled down to five consortiums.

Blackstone however is now seen as the favourite to win at least part of Central Park.

It is also likely to be far more involved in the Irish market beyond Central Park.

Among the assets it is sniffing around are the Irish Bank Resolution Corporation loan portfolios Projects Rock and Stone.

Project Rock is made up mostly of loans secured against commercial real estate in Britain, and a small amount of German and UK commercial loans.

Stone meanwhile is made up of European commercial real estate loans that were handed out by IBRC.

Earlier this week the special liquidators for IBRC pulled the contract for managing the bank's remaining loans after it emerged that the amount that would not be sold off would be much smaller than had been estimated originally.

Irish Independent

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